Institutional investors are getting into the Bitcoin market via OTC trading platforms. Currently, the OTC trading market is said to be over two times the size of regulated exchanges with some desks handling over $100 million a day in transactions.
However, the entry of more institutional players is huge news for the crypto industry. According to many crypto pundits, institutionalized investors are the missing element needed to kick-start the cryptocurrency price recovery journey. This is after the spectacular price dip that occurred at the beginning of the year, which dragged down the market into a bearish stretch.
According to a report by Bloomberg, institutional investors have already started to invest in the industry, with some buyers currently buying over $100,000 worth of digital currencies through OTC trading platforms. This is as revealed by Bobby Cho, head of trading at Cumberland, which operates an OTC trading platform under DRW Holdings LLC.
In his view, the crypto industry has been waiting for big institutionalized investors to jump on the bandwagon, most likely following a bitcoin ETF, to help prop up the flagging market. But apparently, the big investors are already here, and many are using the OTC crypto industry to make huge buys.
Established crypto mining firms are reportedly also utilizing OTC trading platforms to sell digital coins to institutional investors at higher prices instead of waiting for the rates to go up, and many have their own liquidity desks. According to the Bloomberg report, coins from mining companies apparently command a price premium of up to 20 percent of their prevailing market value. This is because they are what many digital currency investors consider as ‘unadulterated’ crypto assets.
Because the coins are brand new and untainted by illegal activity, they easily meet regulatory requirements imposed by government bodies.
OTC Markets Have Major Advantages for Investors over Crypto Exchanges
According to Cho, many investment firms are choosing to invest in the cryptocurrency industry at this time because of current market stability. It allows for better market prediction and risk evaluation.
Among the main advantages of using OTC trading platforms, especially for big investors, is that they generally have sufficient cryptocurrency liquidity to facilitate multi-million dollar digital coin orders. Moreover, buying millions of dollars worth of crypto on exchanges is hardly a straightforward process. Market movements arising from the huge transactions are also greatly subdued, and unlikely to sway prices by a significant margin.
Another noteworthy advantage is that cryptocurrency prices can be fixed beforehand by OTC trading entities, subsequently mollifying fears of sudden price slides and spikes, which could affect the final value of transactions.